Look Out Dow Below, And Watch For The Silver Streak

You can also view this article on investing.com which was published on Jun 27, 2022 02:31AM ET

Look Out Dow Below, And Watch For The Silver Streak

Dow

Look out for a Dow break below this month’s low; it could portend a significant and potentially swift drop toward 24,000. The near term upside resistance for the index is in the 32,200 – 32,500 zone. I have always watched for rallies (or declines lower, as the case may be) into gap zones.

Gap zones often represent areas where both bears and bulls suffer the most. Above the lower band of the rally’s resistance zone (~32,200), should it get there, many short sellers would be stopped out.

Meanwhile, those waiting to sell at the upper band (~32,500) would end up having to chase the market lower, in the event that the Dow would have reversed to the downside before getting to that higher resistance level.

Simply, a turn down from a point within a gap zone frustrates both those who are short, as well as those who seek to sell. In sum, turning lower from a point within a gap zone represents a worst-case scenario for both existent and would be short sellers.

The May 24, 2022 report identified a low from which, I forecasted, the Dow could double-top around its all-time highs. My reasoning was that most were looking for a counter trend rally at most, while there were those who felt that a new leg up was about to commence.

The short term low was correctly called, but the action since the point to which the Dow subsequently rallied indicates to me that the all-time high identified in the October 25, 2021 report will not be revisited.

3-Year Weekly Dow Chart

As regards the above discussion of gap zones, on the weekly chart immediately below, we can see that intra-June gap as having been closed; however, this is not the case on the Dow’s daily chart which follows it.

On the daily chart, we can see the 32,200 – 32,500 gap zone referenced in the first 3 paragraphs above.

3-Year Weekly Dow Chart

6-Month Daily Dow Chart

Before concluding, I should comment on sentiment. The CNN Fear and Greed Indicator included in prior reports had actually fallen to a ridiculous level of 6. The conclusions in the May report were largely influenced by that fact, as I noted history’s responses to such extreme levels.

I also wrote that acceleration lower would require that something would need to be very different this time, which is not ordinarily a good bet. However, we must examine how and why something could indeed be different this time.

The U.S. government, in the form of the Federal Reserve, along with the most substantial non-governmental interests that are close to them, represent the largest insider traders of all-time.

They have some keen awareness of future interest rate, inflation and economic policy trends. However, Russia was largely an unforeseen wild card.

It is possible that the latter x-factor (Russia/Ukraine) caused a need for the above-referenced insiders to hold up the market, in the face of the mushrooming non-military-related bearishness that was driven by the 3 factors cited in the preceding paragraph.

Holding up a market takes place so that insiders, including the largest investment banks, may line up their sell strategies. Since such strategies include delta hedging, the recipes for a speedy decline can be concocted; delta hedges include option strategies that hedge massive stock positions in the most efficient manner possible (the faster the decline, the greater the number of shares that are hedged since the program involves short term put options).

Do not be surprised if the type of dramatic selling that is described here is triggered by focus on news events coming out of the Ukraine.

Conclusion And Strategy

The Dow opened at 31,717 on May 24, 2022 so, no harm, no foul. Most importantly, however, and notwithstanding anything and everything else, bear in mind the strategy section of the latter report (linked in the paragraph immediately preceding the Dow’s 3-year weekly chart above).

Apart from the rules-based program’s purpose of generating meaningful returns following sustained bullish moves, the strategy is geared to generate sizeable double-digit returns following sharp declines.

iShares Silver Trust ETF

The May 24, 2022 report also called for a silver low. That report also briefly discussed the SLV’s 200-week moving average:

”A year and a half removed from the explosive 2020 run-up’s peak, the iShares Silver Trust (NYSE:SLV) came within 14 cents of the 200-week (4-year) moving average, suggesting that the long term holders have taken their profits and are out for now.”

As we can see from the chart immediately below, nothing has changed to alter the analysis, though I will add that a flush-out (the sort for which silver is so well known) could take the ETF to a level as low as ~$17.90 ($1.50 lower); apart from this chart, nothing at all has changed from the most recent report’s analyses.

3-Year Weekly SLV Chart

6-Month Daily SLV Chart

Conclusion And Strategy

The daily chart above, including its slow stochastic at the bottom, clearly illustrates why a bottom this week would be very typical of silver’s historic price and time cycle behavior.

From the May 24, 2022 report:

”For an options speculator, I would recommend the SLV March 2023, 25-strike calls around ~$1.28, which was Monday’s closing offer.”

The SLV opened at $20.28 on May 24, 2022. The ETF closed Friday (June 24) at $19.51. The option has slipped since the last report to Friday’s closing offer of 97 cents. Barring something extreme at Monday morning’s open, adding to the position at these levels appears most worthwhile for “reasonable speculators.”

My target for the next wave higher is in the $43 area.

Original Post

October 25, 2021June 3, 2022

Dow And Silver Turning Points

You can also view this article on investing.com which was published on Oct 25, 2021 01:12AM ET.

The Dow and silver turning points have occurred, based on the analyses and clear Elliott Wave annotations and interpretations found in last month’s report,“ Dow And Silver Trust’s March To Inevitability.“

Any short term catch-up in the NASDAQ that would hold up the Dow through month-end would be as insignificant as a possible iShares Silver Trust (NYSE:SLV) retest of the $20 area. In neither case would strategy be affected.

While the un-annotated charts below update those from last month, September’s chart annotations illustrate why I believe we have indeed arrived at major turning points. Last month’s clear wave counts imply the interpretations found in both reports.

DOW

In the case of the DOW or S&P strategy, since August 2019, I have advocated an income-generating program that would benefit from the time-consuming rallies that are typical of bear markets, while being simultaneously positioned for leveraged gains in the event of sharp quarterly declines.

As regards my present market view, last month’s report illustrated the ideal scenario for which to be prepared:

“The proximity to the 200-day moving average and the stochastic divergence are plain and clear evidence of a correction of some sort having ended.

“Disconcerting aspects, however, are found in the speed with which the stochastic is advancing toward overbought and, even more ominously, the equally plain and clear dome formation of the top that has been developing since June.

“This means that short sellers can use tight stops, if fading new highs that could result from manipulation that seeks to drag the last dollar and the last short coverer into the market.”

The updated 1-year daily chart appears below. While it is noteworthy that the secularly bearish interpretation continues to play out perfectly, it is critical to understand that divergences in the daily charts have not yet manifested.

That fact would support a decline and rally back to overbought, though to lower slow stochastic levels that are concurrent with a final high in the Dow (once again by a hair). The latter observation must be taken-in, along with the weekly chart (second chart below) that has already provided the bearish divergence.

Still, the 200-day MA and slow stochastic have more logical applications for the short term, for the reasons explained in the past. All-in-all, then, we must comfortably fall back on the preferred strategy; this allows for being positioned, without needing to be perfect and risk missing the next major decline.

I again call attention to the 2007 peak; this scenario would be perfectly in-line with the scenario discussed above, which contemplates a minor new high that would follow a short term decline.

From the Aug. 11, 2021 report:

“Three notable reports I wrote in 2007 (July 7, October 7, December 2) identified key peaks. If one did not trade, however, the first two of those three reports would have left one the poorer. The 3rd was the charm, bearing the title, ‘2008 Dow Crash’.”

Again from the September report:

“The 5-year Dow weekly chart appears below. Beware.

“In contrast to the daily chart above which gave a bullish buy signal divergence that crossed over 20, this weekly chart shows a clear and evident sell signal by way of its negative divergence that led to a break below 80!”

“Conflicting signals are consistent with the Dow’s dome formation that is forming and preparing to roll over and fall out of bed, with a floor far below around 18,000.”

CNN Fear & Greed Index

Again from last month’s report:

“A spike flush-out, as what we just saw, was perfectly consistent with the Dow charts. The “Extreme Fear” reading (below 20) that had already been achieved suggested that a new spike low was already being discounted.

“Will a minor new high in the Dow coincide with a reading in the “Extreme Greed” zone (above 80)?”

As we can see below, a continuation of the spike to 80+ could be completed by month-end (this week). As previously cautioned, though a low in “extreme greed” may have been (and indeed was) achieved, the spike to “extreme greed” could be swift.

Be ready, then, for a key data point within the unfolding major historic turning point in the stock market.

iShares Silver Trust

Sept. 27, 2021 report:

“The 3-year iShares Silver Trust (SLV) weekly chart appears below. My interpretation of the price action since the 2020 bottom at $11 is that the “orthodox low” was put-in at $14, while the subsequent Wave-1 peak concluded at $27 in August 2020.”

Last month’s annotations on the 3 and 11-year charts suggested the possibility of a perfect low. An updated but un-annotated version of the latter is linked here. The updated but un-annotated 3-year chart appears below.

The type of chart in the preceding paragraph gives a very clear look at the critical importance of the $20 level that has been repeatedly seen since 2006, either as resistance or support. Coupled with last month’s annotations, we can easily see why $44 is indeed a very reasonable forecast for the next major cyclical rest area.

Past reports have examined overlay charts of silver versus gold to display the meaningful potential for silver to play fast and substantial catch-up to its big brother. Since silver doubles as a precious metal as well as an industrial one, the overlay chart of silver versus copper since 2008 (courtesy of Refinitiv, immediately below) serves as corroboration of silver’s exciting potential.

Today’s conclusion is unchanged from the previous two months, though the strategy update follows.

From the August 11, 2021 report:

“For speculators, the January 20, 2023 $28-strike calls closed yesterday with a bid-ask of $2.43 – $2.48. In the event of a longer consolidation period, I would advise a more aggressive stance at the next entry point.”

From the September 27, 2021 report:

“The option advised for speculators has fallen to $1.31 – $1.35, and I do indeed advise a more aggressive stance as discussed in the preceding paragraph.”

If so inclined, one may add to the position at month-end, this week. If the week moves even 50 cents higher from Friday’s close over the coming 5 days, one can simply hold off from adding.

Ordinarily, this is not the time to add to long positions, cyclically-speaking. Cycle inversions, however, can occur when markets arrive at major turning points. These are NOT ordinary times, so one must contemplate what may occur during such periods.

May 10, 2020June 2, 2022

The Ideal Strategy For Ongoing Substantial Opportunity

You can also view this article on investing.com which was published on Mar 11, 2020 05:02AM ET.

SPECIAL SECTION: Engineering the Rules-Based Strategy:

How does one concoct the type of strategy that has been recommended in each of the reports since August 2019? This section is dedicated to helping fellow madmen with such engineering.

From the March 4, 2020 report, “Prepping For The Next Wave Lower”:

“To refresh, an appropriate put-combination strategy that is geared for these markets should provide positive results following a positive quarter, while aiming to profit in the 65-95% range after a bear market-style quarterly decline of 8 – 10%.”

Each and every article since the August report linked below, stressed the need to be positioned for a 10,000 point Dow smash with a strategy such as the one above. As we see from the second of the excerpts below, it did not matter if the Dow would continue to rise for the last 4 months of 2019, or if the debacle would have commenced then.

From the August 29, 2020 report, “History Repeating Itself? 1987, 2001, 2008….2019?”

“For the very sophisticated who do not wish to feel that preserving the capital committed to the strategy is dependent on a sharp downturn, an option combination should be devised whereby a positive return is generated as a result of a favorable quarter. Such a strategy would likely include a calendar-price spread, using both long and short put options.”

“With that, one may expect an initial (and possibly yearend) crash to the 16,000 – 18,000 area. Many ought to employ strategies that are not dependent on the latter event. That said, however, be prepared now for precisely such a debacle.”

The recipe’s components:

Generally, a shorter-dated put option is written to gain income that is used to purchase longer-dated insurance. The latter must be engineered to provide substantial leverage in the event of an 8-10% Bear market-style quarterly decline. Meanwhile, the former also serves to generate profits resulting from a bullish quarter. Above all, the engineering must be structured to be weighted to tie the dramatic returns to sharp declines, while only generating moderate profits in the bullish scenario. If one were not so extremely bearish as I am, the engineering would be weighted otherwise.

The mathematical relationship between the shorter-dated and longer-dated contracts should be tied to a rules-based strategy that includes a trigger for realizing dramatic profits after a sharp decline, as well as a rule for actively responding to any decline in the longer-dated put beyond some point, which is price and time-related, in the event of a continued rise in the market. It is important that the longer-dated put maintain sensitivity to market declines, so as to protect against the risk inherent in the shorter-dated leg.

The mathematical relationship between the contracts must provide exceptional downside leverage, which also hedges against any risk assumed by the shorter-dated position. The latter must itself contain a component that hedges against mushrooming losses in the shorter-dated put, in the event of sharp near term declines such as those that we have been experiencing.

The mathematics and ratio are inseparable from the strike prices and expiry dates of the respective contracts and how they are selected. These are inseparable moving parts within the above-referenced mathematical ratio/equation.

Finally, once all the relationships (equations) have been worked out, including the rules-based strategy, the latter must contain a component for determining when to reinvest after realizing dramatic gains. Therefore, the reference to the VIX component immediately below is critical for the management of such a strategy and where we are today.

Again from the March 4, 2020 report:

“Last week’s report reminded that the put program aims to remain invested regardless of whether or not the market is viewed as peaked or bottomed, the exception being when the VIX levels are too high post-liquidation (discussed below).

“Last week’s article explained that the principal consideration in determining the timing for reinvestment after liquidation is the level of the VIX, so as to ensure not overpaying for the newly established combination. For this reason, the report added that the opportunity should present itself early this week (the article wrote “March 1,” which was a Sunday).

“As the chart below reflects, the VIX fell to 25 (24.93) when the Dow crawled over 27,000. The engineering of my own program calls for re-entry on a break of 27.5, so this suggests a newly opened combination. Since we are anywhere but at a peak, the aim of the engineering is to collect income that pays for the protection.”

Historic VIX levels, such as those that we are presently witnessing, make for great income (high near term put prices), as well as protection in the short term, therefore. However, if one were to establish a new post-liquidation position with the VIX at, say, 50, the downside trigger would be hit too quickly and would therefore NOT provide a great deal of leverage to the downside.*

Above, I referred to the relationship (mathematics and the ratio) between the shorter and longer-dated contracts. The mathematics is inseparable from the strike prices and expiry dates of the respective contracts and how they are selected. These are inseparable moving parts within the above-referenced mathematical ratio/equation.

And therein is the rub.

*The mathematical ratio/equation is the basis in relation to which one is to derive the rules-based strategy that adorns and makes functional the relationship and ratio between the shorter and longer-dated put option contracts.

Dow analysis and conclusion:

By making a new low today, however slight, the momentum indicators seen in the 6-month Dow chart below have put in bullish divergences (the slow stochastic below the graph is the more important).

Per the commentary in the first section above, the income and protection strategy is again open, and I assess the overshoot level to which the Dow could now attain to be around 27,250, as opposed to the ~28,100 area cited in the March 4 report, the related excerpt of which appears immediately below.

“The Dow’s correction can overshoot to 28,100, at which point a more aggressive stance would likely be assumed, as was the case at the recent all-time-high.”

As the 1-year VIX chart below illustrates, it has completed 5 waves up, which is consistent with the conclusion that the Dow concluded a 5-wave decline today.

Secondly, the VIX put in a divergence versus the Dow, which, in and of itself, is also bullish short term.

Thirdly, the VIX’s peak yesterday was the 2^nd-highest ever and the greatest since the shocking 90-area in 2008!

In other words, expect that the 10,000-point top-to-bottom debacle forecast in these pages to have transpired with amazing speed in 2020.

Reiterating, the more the authorities tamper with free markets, the worse is the ultimate loss of control. My own view, however, is that the manipulators are the ones making the bets anyway, for many purposes that are not in the public mind. Hence, also as analyzed in the past, often what appears to be a loss of control may be precisely that, an appearance of lost control?

Nothing changes strategy anyway, save for near-term trading, about which, in this case, I do not comment; short term trading is not the concern of these pages since it is highly speculative to make countertrend trades.

Near-term analysis has value for timing pertaining to bearish strategies, but the strategic approach advised in these pages obviates the need to have such concerns.

Silver (SLV) analysis and strategy:

Gold’s (GLD’s) 6-month chart follows and its momentum indicators have turned down from lofty levels. Moreover, the GLD stochastic indicates a double-divergence that dates to the end of 2019.

The previous reports also discussed the phenomenon of gold actually correcting within an uptrend and that its trend is determined by inferring it from the silver chart.

I explained the counterintuitive form of such analytic interpretation so that one not be shaken out of long term gold positions by sharp declines, such as the $40-60 smash that I expect in the near term; most of that smash could even occur tomorrow (Wednesday March 11).

Consistent with the contemplated quick ~$50 hit to gold, the 6-month silver (NYSE:SLV) chart below would reflect a bullish divergence in the stochastic if the SLV were to take a violent but quick smash of its own of ~50 cents to a new low at ~$15.25.

The 8-month VXSLV chart (SLV option volatility premiums) appears below.

From the March 4 report:

“This picture of the SLV’s options’ time premiums explains why options have not been hurt relative to the price decline. The nearly 100% move higher from its 4^th quarter low reflects this fact, but it also suggests that there is room for quite a premium hit if volatility were to cool down.”

The VXSLV subsequently shot even higher to complete a more than 100% move from its December bottom.

Today, as one can see, the VXSLV finally got nailed and inflated option prices got hurt. However, it would get much worse with a near term 50 cent smash and another collapse in the VXSLV, which would be helped along by any cooling in the VIX (the stock market’s principal volatility gauge).

STRATEGY

The best way for silver investors and traders to time adding positions would be to use the VXSLV chart below. It should be treated as an asymmetric indicator that should be used to go long additional silver and silver options at a VXSLV level of ~21(i.e. – option prices would be screamingly cheap).

CONCLUSION

Revisiting the August 29, 2020 report, History Repeating Itself? 1987, 2001, 2008….2019?:

“These asset classes’ (stocks and precious metals) asymmetric performance not only represents the very long term norm, but is also the condition by which one could enjoy exponentially increasing profits, owing to an eruption in these asset classes’ volatility premiums from their respective historic lows.”

The VIX and VXSLV have erupted and asymmetric performance is confirmed and growing, all to the spectacular performance of those who followed strategies aimed at profiting from such an eventuality.

Apart from the 2 reports that are linked in this article, hereunder, please find the other 5 reports which are linked below for easy reference. Among other things, they include (a) the forecast of a 10,000 Dow debacle and $10 rise in silver as strong possibilities in 2020, (b) the reiterated forecast to short at a level approaching, but below, 30,000, (c) the explanation that there comes a point when the authorities WANT markets to collapse, so as to provide cheaper prices for the acquisition of strategic assets and, finally, (d) why it is a mistake to believe that the collapse will have taken place solely due to a specific story, such as the virus.

The plausibility of the analyses comes into greater focus when they are taken into consideration jointly, notwithstanding the correctly forecast outcomes. The latter is not necessary to claim proof of the assertions made, though they obviously lend credibility to the different analyses made in these pages, which included an invitation to investors to make certain studies themselves, of proofs of different market phenomena that were provided in previous linked reports.

This is a time for action, and fruitful action stems from study.

February 6, 2020June 2, 2022

Dow Heads Toward 30,000. Here’s The Best Investment Strategy

You can also view this article on investing.com which was published on Feb 06, 2020 07:24AM ET.

After a corrective a-b-c pattern (Elliott) to last Friday’s low, the NASDAQ made new highs yesterday, leaving little doubt that the Dow would likely follow suit, as it has tended to do when such instances have occurred in the past. It does not take a seer to forecast that this should occur this week, following-up on today’s catch-up outperformance of the NASDAQ by the Dow.

Almost as predictably, one may have guessed last week that this new high could occur. Here is why:

In 2000 (Sid Klein Daily Fax excerpts at New York Major Turning Points), the game was to blame the decline in January of that year on Y2K. This allowed investors to conclude that the pursuant new all-time-high was proof of the market being problem-free, since Y2K was now acknowledged as being a non-issue.

Similarly, the events of September 11, 2001 were understandably blamed for the sharp decline. Regarding the theme of this market phenomenon in the specific context of 2001, please note the first ever online report, entitled “TIMELY.”

By using only a few of countless examples, the linked reports above provide market participants with the opportunity to do a timely mini-study of the phenomena that has market declines blamed on extraneous events; investors then feel safe to get back into the waters when the market surpasses the level from which the market initially fell.

(Given that the equity markets may presently be at a 2000 or 2007-style summit, I advise taking the time to perform the mini-study.)

This time, the prevailing story following last month’s peak was the Coronavirus.

As opposed to being deceived, if an investor understands the phenomena, one will not be fooled and will instead join the front-running big boys in exiting the market ahead of Dow 30,000, by benefitting from the buying demand created by the short coverers’ attempt to achieve the “headline-grabbing round number.”

NOTE: The phenomenon that is the subject of the above-recommended study is caused by the ever-deceptive Wall Street manipulators, hereinafter known as, “The Short-Coverers.”

From the December 2, 2019 report:

“WARNING: At major cycle peaks, I have cautioned that blow-offs occur to nice round headline-grabbing numbers. In this case, 30,000 is such a number, just as 40,000 was the Nikkei’s number to watch 30 years ago. Included in the warning, note that a fancy number serves a “magnet” that is front-run by smart money.”

As regards the believability of this week’s new highs, please note that silver and gold have remained strong, despite the deepening confirmation of the asymmetric trending that has been unfolding between the precious metals and global equities.

Notwithstanding this article’s forecast and analysis, please note the strategies found in the recent articles’ STRATEGY sections.

January 23, 2020June 2, 2022

Perfect Dow Peak, Higher Silver Low?

You can also view this article on investing.com which was published on Jan 23, 2020 02:23AM ET.

The perfect Dow peak, along with silver’s pre-acceleration higher low will likely have been seen this week or next. Confidence is high.

Dow: With respect to the index, the articles referenced in today’s report discussed these events as plausible for the first week of January, consistent with prior years when major tops were made in the year’s opening month. The year’s first week is holiday-shortened as managers trickle back into the office post-yearend window-dressing, so we must paint with a slightly broader brush.

From the December 2, 2019 report:

“WARNING: At major cycle peaks, I have cautioned that blow-offs occur to nice round headline-grabbing numbers. In this case, 30,000 is such a number, just as 40,000 was the Nikkei’s number to watch 30 years ago. Included in the warning, note that a fancy number serves a “magnet” that is front-run by smart money.

“Just as the Nikkei’s summit was just over 39,000 on the first day of 1990, could the Dow peak at a level somewhere between 29,000 – 30,000 during the first week of 2020?”

With respect to silver, all of my momentum indicators and wave counts are satisfied for a silver acceleration from the higher low contemplated in the December 2, 2019 article, in which it was discussed that the orthodox low may coincide with the yearend time cycle bottom, and that the price low could either take place then, or a month earlier, therefore. From that December report:

“In the past, however, when I have written of that cycle, the metal’s unorthodox (Elliott terminology) bottom occurred a month early, as it occasionally does, thereby putting in a higher price low that coincides with the time cycle bottom.”

In the STRATEGY section below, the chart of the silver ETF, the SLV, one can plainly note a corrective near term pattern, which I believe is concluding.

One would ordinarily conclude that the gold ETF GLD chart which follows it is NOT correcting; however, the latter’s near term correction is up-trending. To the Elliott-trained eye, gold is actually correcting; this is inferred from the fact that silver is correcting.

The correct conclusion to draw from such analyses is that the precious metals are strong (inferred from gold’s up-trending correction) and that one may expect silver to accelerate and catch up to gold.

Yes, it’s intuitively twisted….but not philosophically circular. Most importantly, such analysis of the PMs has served well for many years.

From the August 29, 2019 article:

“The inter-relationship of the patterns of the two metals confuses investors. The sole observation about which most all investors agree is that gold leads silver due to its liquidity. For trading and investing in these metals, the most important point, however, is that one may glean gold’s wave count by noting silver’s own Elliott pattern, since they are the same. This must be underscored.

“If one can correctly identify silver’s wave count, one would anticipate gold’s major movements…”

Illustration of the analysis above become self-evident, when comparing the 6-month charts and indicators of the SLV and GLD; they follow immediately hereunder, respectively.

STRATEGY:

DOW:

Prior articles have advised a systematic trading program for protecting one’s wealth. Specifically, as regards the Dow (US indexes), one’s strategy may employ a put combination that is mathematically engineered to provide substantial profits in the event of a bear market-style decline, while generating profits, however minor, in the event of a much-unexpected continued advance, or in the case of bear market rallies, as the case may be

As we see from the chart immediately above, the Dow’s momentum indicators are rolling over, while long term charts (not included) illustrate the index’s trend as bound by the line created by connecting the peaks from December 2017 – July 2019 (as discussed in the August 29, 2019 article).

SILVER:

As I only advise being long precious metals, there is no question of hedging them, but merely utilizing their option contracts to leverage one’s PM portfolio in the strategic manner that one wishes.

Therefore, these reports have advised looking at the 2-year SLV 18 and 19 strike prices as ideal for long term call option speculations.

For transparency, this week, I purchased the January 2021 19-strike calls at $0.84 (today’s close: .87 – .88), as well as the January 2022 19-strike calls at $1.80 (today’s close: 1.78 – 1.87).

For a shorter term play, I also purchased the April-March 2020 18-strike “calendar” call spread for $0.09 (today’s close: .08 – .10).

Albeit a shorter term spec, the strategy in the latter case is to benefit from the safest and strongest part of the 6-month cycle, while aiming to establish a very low cost-base from which to enjoy exceptional leverage, though still laying the heaviest weight of consideration on risk aversion.

18-19 defines the key zone above which the SLV may accelerate, though 18 is also a level that could become a “magnetic” support upon a break into that important area.

In all cases, as with the Dow or S&P options, these precious metals options markets are extremely deep and liquidity is, therefore, a non-issue.

January 6, 2020June 2, 2022

Dow Down 10,000, Silver Up $10? Part II

You can also view this article on investing.com which was published on Jan 06, 2020 01:09AM ET.

The title of this article indicates the extreme risks from which the proposed strategies aim to profit; of course, they may also serve as hedges within portfolios. Therefore, this update of the here-linked December 2, 2019 report may assist in fine-tuning one’s timing.

That 2020’s top-to-bottom swing in the Dow could be 10,000 points, while silver’s trough-to-peak move could be $10 suggest that timing is key for those who seek to leverage their investments by being prudent with regard to entry prices. So, the encapsulated technical analysis hereunder is concerned with timing. As for other factors, valuations are at extremes and politics are merely headlines to be ignored.

Reiterating, the first ever impeachment of a U.S. president remains a possibility, since those triggering the event would be the decision makers who would be strategically seeking lower asset prices in key industries (i.e. – telecommunications, banking, etc.); the political diversion could be blamed for a sharp drop.

Of course, war would fail in that regard, as military events are almost always followed by market advances, notwithstanding any brief pullbacks. On the other hand, however, an event that triggers memories of 2001, as opposed to a military incident (i.e. – Iran) could trigger a deeper and more sustained decline.

NEVER forget, however, that the true reasons for market declines (and even precious metal lift-offs) relate only to valuations and fundamentals and nothing else. This is important for knowing to NOT be fooled by hysterical media reporting.

Dow Jones 30: As previously reported, trading is expected to be bound by the upper trend-line which connects the tops from December 2017 – July 2019. The recent new all-time high was again contained by that trend-line, though a blow-off could temporarily spike above it (see Dow chart below).

As for the ideal target for that blow-off, note the following excerpt from the December 2, 2019 report:

“WARNING: At major cycle peaks, I have cautioned that blow-offs occur to nice round headline-grabbing numbers. In this case, 30,000 is such a number, just as 40,000 was the Nikkei’s number to watch 30 years ago. Included in the warning, note that a fancy number serves as a “magnet” that is front-run by smart money.

“Just as the Nikkei’s summit was just over 39,000 on the first day of 1990, could the Dow peak at a level somewhere between 29,000 – 30,000 during the first week of 2020?”

Also worth noting as evidenced by these recent years’ declines, the degree of the index’s smashes have been steeper after each subsequent peak.

Major cyclical support is evident in the 18,000 – 20,000 area. I again suggest, however, that one employ strategies that do not require bearish trends for positive results (see STRATEGY/CONCLUSION, below).

Silver:

Throughout the years, I have written of silver’s time cycles and cautioned that the metal will often put in a price low a month before its time cycle bottom; the latter would mark the orthodox low, while the former would represent the unorthodox bottom. From the December 2, 2019 article:

“In the past, however, when I have written of that cycle, the metal’s unorthodox (Elliott terminology) bottom occurred a month early, as it occasionally does, thereby putting in a higher price low that coincides with the time cycle bottom.”

Indeed, as we see from the SLV chart immediately below, the lowest price of the post-September 2019 correction occurred early last month, and I would now complete one’s accumulation of silver-related investments at a higher low (see STRATEGY/CONCLUSION, below).

STRATEGY

Consistent with the forecasts implied by this article’s title, one may contemplate the following risk-defined strategies:

DOW: I strongly suggest being rid of non-precious metals-related equities and contemplate hedging strategies. Ideally, such strategies would offer substantial protection against sharp declines, while offering a positive return following bullish periods, including bear market corrections.

One must always bear in mind that most days are actually positive during several periods within any bear market.

To achieve such strategic ends, one’s strategy could involve the use of put option combinations, which include both long as well as short contracts.

SILVER:

The chart of the VXSLV (SLV option time premiums) below dates back to 2011 and clearly illustrates the dramatic potential for the appreciation of volatility premiums. Even a move to 30 on the VXSLV level represents substantial profit.

If one has concerns about silver’s downside potential, one can at least note that the VXSLV really had nowhere to go but up, certainly if one believes that the VXSLV and the SLV will trend co-directionally, thereby providing a positive double-whammy for silver option speculators.

The short term charts of the VXSLV (not shown) show that a dip may be possible over the coming days, which would be consistent with a slight drop of 25-40 cents in the metal, owing to silver’s short term overbought condition.

Consistent with this section’s 2nd paragraph, and given silver options’ cheap premium levels, too much finagling looking for a better price would be illogical. Remember, this is the precious metals’ major underperformer. Gold, as always, is ahead of the curve, while others have actually put in all-time highs.

Reiterating last month’s recommended strategies one may look at 1 and 2-year call options. The historically low silver option premiums (see chart immediately below) offer speculators price levels that make longer term contracts competitively cheap when compared to shorter dated contracts; as the bull market ages, longer dated contracts will become more expensive when compared to short term contracts. This is the outcome of the market’s expectation of higher prices for the longer term.

The fact that this quantitative analysis aligns so well with the price action in the metal is a recipe for substantial profits, if managed correctly.

Also consistent with last month’s suggestions, after a break to new multi-month highs one could look to write options against the long position(s). The written (sold) position(s) would protect capital and potentially even increase the investment’s leverage, depending on how the written position(s) is/are subsequently managed.

The above was written on January 5, 2020.

December 2, 2019June 5, 2022

Dow Down 10,000, Silver Up $10?

You can also view this article on investing.com which was published on Dec 02, 2019 03:06AM ET.

The risk is inordinately high that 2020’s top-to-bottom swing in the Dow could be 10,000 points, while silver’s trough-to-peak move could be $10. The analysis hereunder takes an abbreviated technical look at these markets.

Briefly, the fundamentals are summarized by super-valuation and the long term reversal in interest rates; the latter affects price-earnings multiples in a highly leveraged fashion.

Politically, a first-ever successful impeachment of a U.S. president could be the excuse for a shockingly swift decline.

Reiterating from the August report, there is a point at which the powers-that-be benefit from a market bashing since it creates the desired valuations for accumulating politically strategic assets in the global marketplace (i.e. – telecommunications, resources). In this scenario, those powers would be ambushing and betraying Trump who would have misjudged his creators’ interests.

Dow Jones 30: The Aug. 29, 2019 article reflected the view that the Dow had already peaked, or would conclude the year with trading bound by the upper trendline which connected the tops from December 2017 – July 2019.

In the case of a continued stock market advance which will have taken place during this year’s second-half, 2020 could portend utter calamity to levels which are, in fact, historically absurd anyway, though the magnitude of the decline from today’s nosebleed levels would usher in panic, both due to the size of the decline, as well as the speed with which it would occur.

I again remind that, per recent years’ activity, the magnitude of the index’s declines have generally increased off of each successive peak.

Expanding triangles within expanding triangles exist since the 1970s (a single such triangle suggests increasing volatility before a drive lower), thereby forming the background for the conclusion of the post-March 2009 major cycle 5-wave advance.

Significant cyclical support exists in the 18,000 – 20,000 area and, as I wrote in the August article, one may employ strategies that are not dependent on this event (see STRATEGY/CONCLUSION, below).

WARNING: At major cycle peaks, I have cautioned that blow-offs occur to nice round headline-grabbing numbers. In this case, 30,000 is such a number, just as 40,000 was the Nikkei’s number to watch 30 years ago. Included in the warning, note that a fancy number serves a “magnet” that is front-run by smart money.

Just as the Nikkei’s summit was just over 39,000 on the first day of 1990, could the Dow peak at a level somewhere between 29,000 – 30,000 during the first week of 2020?

Gold And Silver: From the August article:

“The inter-relationship of the patterns of the two metals confuses investors. The sole observation about which most all investors agree is that gold leads silver due to its liquidity. For trading and investing in these metals, the most important point, however, is that one may glean gold’s wave count by noting silver’s own Elliott pattern, since they are the same. This must be underscored.

“If one can correctly identify silver’s wave count, one would anticipate gold’s major movements…”

Consistent with the above, the relative power in gold is masking its true wave count, as corrections actually occur within up-moves. Silver, however, trades in a traditional manner. As we see from the chart below, silver’s decline from the September peak includes a wave-c sub-division that is timed to bottom perfectly with its 6-month cycle low at month-end.

In the past, however, when I have written of that cycle, the metal’s unorthodox (Elliott terminology) bottom occurred a month early, as it occasionally does, thereby putting in a higher price low that coincides with the time cycle bottom.

To truly hedge one’s conventional assets, while also being positioned to benefit from a potentially substantial multi-year rise in PM prices, one may contemplate using precious metals ETF options (i.e. – GLD, SLV) and precious metals equity index calls (i.e. – HUI, XAU), in conjunction with equity index options (i.e. – S&P, DIA), to efficiently reallocate exposure to PMs from ordinary (non-PM) stocks, by aiming to benefit from the outperformance of precious metals versus stocks.

Again from the August report:

“These asset classes’ asymmetric performance not only represents the very long term norm, but is also the condition by which one could enjoy exponentially increasing profits, owing to an eruption in these asset classes’ volatility premiums from their respective historic lows.

“Such a strategy would then equate to a highly efficient reallocation of assets from stocks to precious metals, particularly as little capital deployment would be required as compared to the volume of asset turnover required, if one were to sell stocks in favor of precious metals or their equity indices.”

In 2011, gold topped over 1900, having skyrocketed though its 1980 peak above $800. Silver, however, found its summit just under $50, thereby only double-topping with its 1980 (Hunt Brothers) blow-off (see STRATEGY/CONCLUSION, below).

STRATEGY

In deference for the forecasts expressed in the first paragraph of this article, one may contemplate the following defined-risk strategies:

DOW: I would advise being rid of non-precious metals-related equities and contemplate hedging strategies, certainly if the latter includes a mean by which to avoid losses in those hedging positions after market advances, and certainly if small profits could be enjoyed under those circumstances. Such a strategy could involve the use of put combinations which involve long and short contracts.

SILVER:

Speculators may consider the purchase of 2-year SLV calls ~15 – 20% out-of-the-money, as the 6-month time cycle is set to bottom at month-end, whether the price low is now or then.

Generally speaking, one may then look to write options that expire this year against the 2-year calls, sometime in mid-April or so. The written (sold) position may protect capital and even increase the investment’s leverage, depending on how the written position is subsequently managed.